REPUBLIC vs.

HEIRS OF JALANDONI

DOCTRINE
none

FACTS:

 Isabel Ledesma died intestate on June 23, 1948 leaving real properties situated in the provinces
of Negros Occidental and Rizal and in the cities of Manila and Baguio, and personal properties
consisting of shares of stock in various domestic corporations.
 On November 19, 1948, Cesar Jalandoni, one of the heirs, filed an estate and inheritance tax
return reporting the following:
o (1) that the real and personal properties owned by the deceased and her surviving
husband had a total market value of P1,324,555.80;
o (2) that after deducting therefrom the conjugal share of her husband and some expenses
the net estate subject to estate tax was P28,148.04; and
o (3) that the amount subject to inheritance tax was P542,225.83.
 On November 20, 1948, BIR made the first assessment and asked for payment of the amounts
of P31,435.95 and P58,863.52 as estate and inheritance taxes, respectively, stating therein that
the assessment was "to be considered partial pending investigation of the return.", which
Cesar Jalandoni paid
 On January 27, 1953, BIR made the second assessment and asked for showing that there
was due from the estate the amounts of P5,539.67 and P9,899.37 as deficiency estate and
inheritance taxes, respectively, for which reason a demand was made on Bernardino Jalandoni
stating therein that the same was still "to be considered partial pending further investigation
of the return,"
 Said investigation was completed and BIR found under-declarations and omissions in the
properties of the heirs in the tax return.
 On May 9, 1956, BIR made the third assessment and required the heirs to pay the amounts of
P29,995.30 and P49,842.05 as deficiency estate and inheritance taxes, respectively, including
accrued interests.
 Lorenzo J. Teves, in his capacity as counsel of the heirs of the deceased, wrote a letter to the
Collector of Internal Revenue setting up the defense of prescription in the sense that the
deficiency in the estate and inheritance taxes payment of which was required therein can no
longer be collected since more than five years had already elapsed from the filing of the return
invoking in his favor Section 331 of the (old) National Internal Revenue Code.
 In defense, the Collector claimed that since the estate and inheritance tax return which was
filed by the administrator or by the heirs contained omissions which amount to fraud
indicative of an intention to evade payment of the proper tax due the government, the
taxes then being collected could still be demanded within ten years from the discovery of
the falsity or omission pursuant to Section 332(a) of said Code, which period had not yet
expired, and as a consequence, the assessment notice was reiterated with the request that the
deficiency estate and inheritance taxes therein demanded be settled as soon as possible.
 On trial, CFI Manila ruled that the tax return of Cesar Jalandoni was false and fraudulent and
therefore subject to the provision under Section 332(a) of the Tax Code.

ISSUE/S
Whether or not the BIR’s right to assess already prescribed due to the allegedly fraudulent inheritance tax
return
HELD/RULING
The Court ruled that there was insufficient proof that the inheritance tax return is fraudulent, which
means the right to assess already prescribed.
After comparing the inheritance tax return filed by Cesar Jalandoni with the examination results from CIR
Examiner Genaro Butas, the Court ruled the following:

 The three lots were already declared in the return submitted by Bernardino Jalandoni as
part of his property and his wife for purposes of income tax, and there is reason to
believe that their omission from the return submitted by Cesar Jalandoni was merely due
to an honest mistake or inadvertence as properly explained by appellants.
 The alleged undervaluation of the sugar and rice lands are the result of an honest
difference of opinion and not necessarily an intention to commit fraud - if there is any
mistake in the valuation made by Jalandoni, the same can only be considered as honest
mistake, or one based on excusable inadvertence, he being not an expert in appraising
real estate.
 As for the shares of stock, it is a known fact that stock securities frequently fluctuate in
value and a mere difference of opinion in relation thereto cannot serve as proper basis for
assessing an intention to defraud the government.
The Court also recognized that the heirs expressed their willingness to pay all taxes properly assessed
against them from the first and second assessments, so it is held to be not indicative of fraud.